Crocs, Costco and brand opportunities
Costco is now selling Crocs shoes for $21.99 a pair. A few days ago I noticed the display on an end cap, two colors, pinkish and greenish, so not the greatest shades, but apparently the real deal in the standard beach clog model.
This represents another brand challenge for Crocs, which I’ve written about here and here. Personally, I see it as a major brand opportunity.
The Crocs response: “defend the brand”
The fact that Costco is selling Crocs is news for several reasons. First, Costco has the shoes in some volume, and the prices may be attractive to Costco customers. Second, Costco has 50 million cardholders, with immense purchasing power. Third, Crocs doesn’t approve of it, since Costco is not part of their brand distribution strategy.
From Crocs:
While there have been rumors and speculation that we are now selling our Crocs-branded footwear to Costco, this is untrue. We have not sold Crocs-branded products to Costco nor have we authorized any of our customers to sell our products to Costco; however, we have discovered instances where we believe our products were being sold indirectly to Costco and we promptly terminated those relationships upon learning of that behavior.
As the Crocs CEO stated, “We are continuing to take aggressive measures to prevent this from happening. I want to reiterate that Costco is not an authorized dealer of Crocs products.”
In this classic brand defense strategy Crocs is attempting to protect its brand identity and pricing power by trying to control distribution through its approved channels. There’s logic in this approach, because Crocs shoes are unique in many respects, and there’s already tons of low-cost imitators on the market selling in the $10 range.
Limits of a brand defense strategy
That said, let’s also note that the CROX stock price has dropped from a high of 74 in October, 2007 to about 18 today. To some, such a huge a drop in six months may suggest an “embattled brand,” its price points under siege, hunkered down behind the brand gates, circled around its brand assets, fighting to maintain every last bit of exclusivity.
Such a focus on brand assets is understandable, but it may not address the real threat. Companies may find themselves in “brand defense mode” because they haven’t created new avenues of brand exclusivity that advance the context of the brand. Or the brand may be structured too narrowly, with its brand value mostly IP and contractual, rather than deeply geared in specific customer lifestyles.
Brand innovation is the best brand defense
Over the years I’ve come to believe that brand innovation is the best brand defense. You take your brand where your customers are headed, not where the brand stood five or ten years ago. Fight for the future, not the past.
Other thoughts:
- Brands conceived as “assets” will bog a company down. Assets don’t innovate. Often, they wind up fighting for progressively smaller bits of turf while competitors march ahead.
- Brands are offensive weapons. When your brand becomes entrenched in defensive battles, something is not right. Either your brand strategy needs strengthening, your brand vision is too short-sighted, or your brand innovation is lagging the market.
Costco as an opportunity for the Crocs brand
Crocs is an innovative company, with a product that’s more than a fad, so it’s distressing to see them in defensive brand mode. I’m wondering if there’s not a better way forward.
Maybe Costco is an opportunity for the Crocs brand, rather than a threat.
Some data points:
- Costco doesn’t sell junk. Many people shop at Costco because it carries major brands, known measures of quality. Costco innovates on quality and price.
- To repeat, Costco has 50 million cardholders. That’s at least 100 million feet, not counting other family members.
Ergo, perhaps Crocs could work with Costco to package a special Crocs offering that doesn’t threaten Crocs price points at authorized dealers, yet promotes the brand while providing unique value to Costco shoppers. Maybe it’s a 2-pak or a 3-pak, or a pair in a certain style with some kind of “extra” that poses no threat to fashion-forward Crocs at department stores. And yes, I know you can’t do multi-paks of footwear like you can with jars of spaghetti sauce, but creative brand minds could figure a way to make it happen.
